TUPE service provision rules should be given literal interpretation, Court of Appeal says

The Court of Appeal has confirmed that employees of a service provider cannot take advantage of certain legal protections when the client they provide services to changes at the same time as the company that they work for.02 Nov 2012

Lord Justice Elias said in his judgement that the rules concerning service provision changes (SPCs) were "not complex" and did not require "a purposive approach" to ensure that they were applied so as to cover every situation in which Parliament intended legal protections to apply.

"It would be quite illegitimate to rewrite the statutory provisions in the very broad way suggested by [the employee]," he said. "This is domestic legislation and is not giving effect to EU law ... The language of [the regulation] is only consistent with the situation where there is the same client throughout; and [a second provision], which focuses on the intention of the client, is premised on that same assumption."

Last year, the Employment Appeals Tribunal (EAT) held for the first time that there was no service provision change (SPC) when the providers of the service, in this case a property management company, changed at the same time as the legal owners of the properties. This meant that legal protections granted by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) did not apply. TUPE protects the rights of employees whose employers are taken over by new owners, and was expanded in 2006 to govern situations where work is outsourced, brought back in-house or the service provider is changed.

The case concerned a property manager, Mr McCarrick, who was initially employed by Waterbridge, whose managing director was a Mr Hunter. Waterbridge was sold to WCP Management and Mr McCarrick and others transferred to that company. The management of the properties was then passed by property receivers to King Sturge but McCarrick still worked for Hunter and was paid by Hunter for the work. He argued that his employment was the subject of a TUPE transfer from WCP to Hunter.

Without a relevant TUPE transfer, McCarrick did not have sufficient continuity of employment to bring a claim for unfair dismissal against his previous employer.

Employment law expert Maria Passemard of Pinsent Masons, the law firm behind Out-Law.com, said that the court had applied a “literal interpretation” of the rules to confirm that continuity of the client was the key element required for the protection to apply.

“Counsel for Mr McCarrick argued that a purposive approach ought to be applied to the regulations regarding whether or not there was an SPC, but the judge concluded that there was no basis for giving the language an artificial or expanded meaning,” she said. “However, he did point out that it might be necessary ‘not to be too pedantic’ with respect to the question of whether the activities carried on before or after the SPC are sufficiently similar.”

Passemard suggested, however, that the case may have had a different outcome had McCarrick’s argument been different.

“The key point for me is that the employee could have argued that there was a business transfer, not just an SPC, and that may have altered the court’s approach,” she said. “It should be argued in the alternative to SPC-type transfers.”

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